Umbrella insurance is additional liability insurance over and above the policy limits of your other liability coverage on homeowners or auto insurance. Its purpose is to protect you against major claims that might exceed your policy limits. Once your policy limits are exhausted, umbrella coverage is triggered. The umbrella coverage will have its own policy limit though, which is usually set at a minimum of $1 million.
Umbrella insurance can also operate as primary insurance for risks that aren’t covered by standard liability coverage like libel or slander. This added coverage benefits people with significant assets who might also be at a higher risk of being sued, but you can never be too careful. If a large judgment is taken against you, your home, car, bank accounts, investments and even future income can be exposed to collection in that judgment. It even covers you if no lawsuit is filed. When compared to other types of insurances, the cost of umbrella coverage is significantly less. Certain factors such as your age, driving record, credit score and claims history can contribute to an even lower umbrella premium.
Umbrella coverage is generally only available if you buy your insurer’s maximum auto and homeowners insurance coverage. That’s ordinarily a $300,000 per person limit with $500,000 per occurrence. You’re probably not going to be able to get the coverage if you’re riding on a $100,000/$300,000 policy. Should you be liable for a serious auto accident, and the damages are in excess of your $300,000/$500,000 policy limits, your umbrella coverage kicks in to the extent of its policy limits.
Think of the bigger picture. At the cost of umbrella coverage, you’re getting an extra cushion of protection at a low cost. It’s well worth less than a dollar a day.